Monday, 18 September 2017

MUSKRAT WILL DESTROY UTILITY SYSTEM IN 2020

Guest Post by PlanetNLPlanetNL1: Like
a Hurricane - Muskrat To Destroy Utility System in 2020This guest
blog series is offered to demonstrate the true value of Muskrat Falls (aka Lower
Churchill Project) and to expose the risks and burdens imposed by it on Newfoundland
ratepayers and taxpayers.The view will
be predominantly forward looking, relying on best available project and market
information to deliver plain economic analysis that can be appreciated by a wide
range of people.There will be little
ranting as the dire economic concerns will speak for themselves.

First up is a
deeper exploration of consumer billing rates than Nalcor and Government have
been providing. The Nalcor rate projection
has consistently gone up as the Muskrat project has advanced with cost overruns,
yet it seems they have not given all the facts. They already have a prediction of more than
doubling rates after the project is commissioned in 2020 but PlanetNL projects
that rates will actually shoot much higher.

Essential
Market Background

The billing
rate on the island of Newfoundland depends on two basic things: revenue and
sales.

First is the
required revenue needed to keep NL Hydro and Newfoundland Power running.NL Hydro generates over 90% of the energy
production and they provide all the high voltage transmission while NL Power
does over 90% of the retail distribution.In recent years these two entities combined, have typically needed about
$700M annual combined revenue to service the island market.The same island market which is solely responsible
to pay for Muskrat Falls and will bear the entire costs and debts demanded by
Muskrat come 2020.

The second
key detail is the NL Hydro energy sold into the main island market.This is the energy base that sets the rate
both before and after Muskrat Falls.This figure has been riding along near 7000GWh (1GWh = 1000MWh = 1,000,000KWh)
in recent years.

To get the
billing rate, simply divide total revenue by energy sold. In recent years, this
was typically $700M/7000GWh = 10c/kwh (before HST).The Newfoundland island rates have been
stable around this level and typically right about average within Canada or
slightly lower than average.

About 80% of
NL Hydro’s 7000GWh supply is hydropower with the Bay D’Espoir system contributing
almost two-thirds of the energy.About
3% of energy comes from two small wind turbine projects in Fermeuse and St.
Lawrence.The Holyrood thermal plant makes
up a significant 20% of energy but it comes with a substantial annual fuel cost
of about $150M.

About 60% of
the total island energy consumption is in the domestic residential category, just
over 30% is commercial, and under 10% is industrial usage.Each market segment gets its own rate
structure but for simplicity the discussion here will be centered on domestic
retail rates.Commercial rates work out
close to the same as domestic and the rate increase should be comparable.The small industrial sector is a different matter:
they pay about half the domestic rate and would be adversely impacted by large
price increases.Assuming industrial
rate impact is likely to be minimal, the rest of the customer base will see
their subsidization of industrial power increase substantially.

Consumers
Will Decrease Energy RequirementsNalcor’s
June 23, 2017 Muskrat Falls project update indicated the domestic retail rate
will be over 23 c/kWh (before HST), approximately a 140% increase over the
2016/2017 rate of 9.7 c/kWh.Despite the
massive rate hike, they forecast energy sales to hold quite steady to the 7000GWh annual level with a brief 4% reduction centered on the year the rate hike
is introduced and returning upward a year or so later followed by endless years
of steady demand growth.

Virtually
any energy authority that isn’t trying to push a costly project onto its
customers would anticipate a much greater drop in demand than 4% when a
permanent 140% rate increase occurs.An
excellent source, and there are many others with similar findings, is the US
Energy Information Administration (an agency of the U.S. Department of Energy):
a comprehensive 2014 EIA study asserts that when electricity rates double, long-run
demand will drop by 40%.

Applied to
Nalcor’s suggested 140% price increase, the EIA energy sales reduction factor
would be 140% x 0.4 = 56%. It’s simple and widely accepted economic logic that
when price increases substantially on any commodity, consumers soon buy less of
it and look for substitutes so they can save money.

While
detailed analysis will be saved for a future post, this analysis will
conservatively use a modest 30% drop in energy sales from 7000GWh to
5000GWh.Lower levels than this pose
greatly increased hardships on consumers.

The 2020
Rate Hike

Subject to a
more than doubling of electricity rates, consumers are guaranteed to change
their habits and find ways to use less power in general.Large numbers will seek out more efficient
heating alternatives than the simple resistance heaters that are in 70% of Newfoundland
households and probably a higher percentage of commercial buildings.The 30% energy sales drop can be easily found
and it is a massive reduction to the bottom part of the rate formula.

Meanwhile
the formula’s top half, revenue requirement, is about to balloon.Nalcor has not released a 2017 revision of Muskrat
future annual costs but the assumed contractual payments with latest overruns
will exceed $800M annually in the early years (climbing steadily beyond
that).Partially offsetting the big increase
is the elimination of $150M in Holyrood fuel savings.Total revenue requirement is therefore raised
to $1350M.

To get the
new billing rate, divide $1350M revenue by the predicted 5000GWh energy sold: this
computes to a 2020 rate requirement of 27 c/kwh.

Next, allow
that industrial users get largely exempted from the rate increase, pushing
domestic and commercial rates up to about 30 c/kWh.

But wait,
there’s more.As a double-check on future
revenue requirement, multiply Nalcor’s 23.3 c/kWh projection by the near 7000
GWh sales forecast: their implied revenue requirement is about $1550M.It appears they have an extra $200M costs
buried in there.Is it possible that the
rate increases of 2017, and more forecasted for 2018 and 2019 represent
permanent additions to the cost base and not just short-term project driven
costs which was their supposed justification for these near-term increases?

If the
permanent cost base is rising by $200M, then rates are directly impacted by
another 4 c/kWh.As every cost increase
motivates consumers to use a bit less, the future bill rate is easily in the
neighbourhood of 35 c/kWh.That would be
a rate triple the Canadian average and double or more the next most expensive
provinces.

What Happens During An Affordability CrisisMany
consumers already struggle with rates around 10 c/kWh. They scrape by and make tough spending
decisions while some depend on formal assistance programs or informal
assistance from family and friends to make ends meet.

At 15 c/kWh,
it’s easy to foresee that a number of homes would likely close as seniors and
other low-income people decide to live elsewhere in multi-family homes to
reduce their cost of living.Likewise
some businesses will have to downsize or close as their costs rise – these
actions cause job loss and subsequent socio-economic pressure.

As the rate surpasses
20, or 25 or even the stratospheric 30 -35c/kWh suggested above, swaths of
additional customers simply can’t go on paying their bills: large numbers of
ratepayers become casualties and heavy damage mounts.

Compounding
this distressing scenario, NL Hydro will find itself in the position of trying
to collect revenues no matter what.When
a group of consumers don’t pay, utility revenue shrinks and the remaining paying
consumers will be targeted with additional rate hikes.The Public Utilities Board, solely committed
to the reliable operation of the utility, would have to approve the increases.Theoretically, rates would spiral further
upward as the customer base diminishes with every increase.

The cashflow
will never materialize as more consumers flee, don’t pay, or get disconnected. NL
Hydro will never get close to collecting its required revenue.Theoretically, at some critical price point
on that upward path, no more revenue can be raised and rate increases actually
decrease revenue.Beyond the tipping
point, the stability of the market gives out and things collapse, including big
things like utility companies.

When
consumers fail to deliver the cash, Hydro and Nalcor (including all the subsidiaries
that make up the different lines of business within the Lower Churchill
Project) will find themselves in financial default to their lenders and equity
holders.Staying the course guarantees that
the Newfoundland utility system is headed straight to a catastrophic bankruptcy
in 2020 or 2021 latest with maximum socio-economic harm to all ratepayers.Next PostIn late
July, Premier Ball spoke of a maximum 17 c/kWh rate and that rate mitigation
measures must be found to make up the difference.Is permanent government subsidy an acceptable
solution?PlanetNL runs the numbers and
the outcome is an even bigger unnatural disaster.

PUB
submissions - http://www.pub.nl.ca– a vast number of documents have been reviewed to
prepare this series and a couple of them will be cited individually in the
future.For the full breakdown of how
rates are set, feel free to review about 1000 pages of information in the latest
General Rate Application – or accept my simplified version.

About
PlanetNL:

Frustrated
by the continuing lack of honest and credible information from Nalcor and
Government, PlanetNL, having a suitable analytical background, is presenting
independent research and calculations. This is a spare time activity outside of
regular professional commitments.All key
information used to develop the views and analysis are publicly available.The analysis cannot avoid entering into
public policy space: if Government or Nalcor wish to refute the analysis, they
are welcome to present an open and honest rebuttal.

61 comments:

The sad economics of NL Hydro laid bare. Thanks for this grim but realistic appraisal of what Danny's vanity project will do to the cost of power and the social upheaval that will result. The only "mitigation", perpetual subsidy from the taxpayer, will shrink the tax base as people flee to friendlier provinces. The result, increasing burden on the remaining base will be a disaster for NL.

The clear eyed analysis in this post is the first step. Demanding the facts from Nalcor and some accountability for the fraudulent demand projections and cost of MF lowballing is warranted.

Restoring regulatory oversight (PUB, Consumer Advocate independence, ditto for the Auditor General) is essential also. In short your democracy is in worse shape than Nalcor and will take brave action to restore.

This poses personal risk to individuals in PlanetNL but it is time to come out of the shadows and confront the fire breathing dragon.

NS ratepayers having a bad day. Maybe an interprovincial association of ratepayers against gov. boondoggles in hydro developments, would be of some benefit at this time. This could be effectively facilitated through the Ecology Action organization in Halifax.

Thanks again to UG in simplifying as much as possible of how future rates and how much NALCOR needs to generate to keep the system running fincincially. From my simple understanding NALCOR also controls or has access to oil and mineral monies, but am sure there are more knowledgeable persons than me can deny or variety this. If NALCOR has control of oil revenue they will just rob peter to pay Paul as the saying goes. Is dracular, NALCOR, in need of large sums of revenue, are we just leaving them in charge of blood transfusions? They will siffion all they want from oil revenues, to pay their Hugh bonuses plus any short fall in revenue they need to keep the power system running. That means less oil money for health, education, transportation, and other government services. Is this the way our so called democracy will work ... Or fail?

Well God bless PlanetNL. Obviously, we can use another reliable source of truthful information.

Ball doesn't have the authority from the oligarchy to commence a (truly) in depth Forensic Audit and Public Inquiry. It is not in his best financial interests, nor their's.

Though we've made some progress locally, we haven't made enough. ... (imo) Ottawa is where we will find the key to this financial prison sentence. We need to get game on a national level and move up on the P.M's priority list.

We have more than ample public relations ammunition, including the following: (and please feel free to add any that I may have overlooked):

* flooding, * drowning, * poisoning, * personal and commercial provincial bankruptcy levels on the rise, * a rapidly tanking economy, * a virtual prohibition on alternative energy sources for consumers to accommodate extortion through public electricity bills, * the PREVENTION of the creation of thousands of new jobs in globally burgeoning alternative energy industries,* no financial end in sight to the costs of finishing the project and no estimate whatsoever from our crown corporation,* soaring electricity rates that are set to double just in the coming few years, (then what?),* coming generations of our children tasked with paying for corrupt contracts, * internationally known corrupt corporation/s involved, * profoundly disturbing safety reports being buried, * insanely high bonuses handed out for pathetically poor and perhaps criminally prosecutable performance/s,* hundreds of Police shipped to Labrador to guard industrial equipment from sabotage by a handful of peaceful and spiritual protectors while other citizens in Canada suffer from a lack of police presence, * entirely peaceful children, grandmothers, aged elders, and cancer patient/s being arrested and in several cases jailed with dangerous convicted criminals,* proponents of the project, including those paid to represent the public interest, owning stock in companies holding special contracts with our crown corporation for egregiously low electricity rates, while yet unborn children are tasked with subsidizing those corrupt contracts for decades to come,.... etc. etc.

The other hydro dam projects across Canada are making noise, as are we. If we combine our voices they will become louder. More importantly perhaps, they will become national.

Political exposure and embarrassment on a national level will get the attention from Trudeau that we simply do not get from the losers that are currently running (destroying) our province. National media attention will also stir many of our more complacent citizens in NL from their apathetic slumber. Who knows we may even see more folks out for a peaceful walk holding a placard.

Please don't ever forget that Nalcor continues to completely ignore the many species of fish that have been using this Churchill, Grand, Hamilton, Mistashipu River their home for time immemorial. Largest River in the province by far. NO Fish ladder or fish-way for the Atlantic Salmon on their old migration route used for untold thousands of years a sustainable local source of good healthy food being brought to a screeching halt and not a word in public about this glaring catastrophic fact that only old time locals seem to know and understand. Our disguising MHA who pretends he knows it all don't know shit when it comes to the Churchill River and its species even its geography. How could he not being from here all he ever believed in was some partial information mostly written by other outside documentary types. Sickening to be from here alongside the River in the flood zone of that man made corrupt economically crippling boondoggle. I want to vomit just thinking about the dam mess Danny and his minions have created or more realistically destroyed. Bastards.

Unfortunately the fix is in and it involves much suffering for all. My guess is that the govt's so-called review of the tax system is really about capping electricity rates and coming up with a combination of income taxes, surtaxes, and consumption taxes that allow MF to be paid for by every Nflder, regardless of their electricity consumption(Jim Feehan of MUN's infamous economics dept floated this one a while back). If you think about the implications of 23 cent electricity, not just for households but for all businesses and institutions, especially Come-By-chance, Kruger, and Long Harbour, the ratepayer system becomes untenable. The govt is no doubt considering preemptive action rather than risk the massive job losses, and subsequent population losses, that would ensue from an exclusively ratepayer plan. Don't think this about to happen? Drive around the east end and down Waterford Bridge Road to see all of the big houses for sale. The smart money is on the move.

I would however question your statement that Holyrood makes up about 20% of the island's energy use.

For the 5 year period prior to 2006, Holyrood contributed less than 24% to the island energy use, and over the 10 year period from 2006 to 2015 it has provided an average of just over 13%, (see http://www.vision2041.com/holyrood.html ) --- though this difference may have very little impact on your overall analyses/conclusions.

HRT provides about 1300GWH of peak energy a year and uses 3 million bbls of oil a year. Power and Hydro/Nalcor came up with an insane demand forecast 7600 GWH in 2010 to 10500 GWH in 2041 and 12000 GWH by 2067. Not once did MF proponents consider price elasticity, assuming even if oil went over $135 demand would remain the same. Whomever did the demand forecasts should be charged with criminal fraud, criminal incompetence and criminal negligence - as should the people whom agreed with the forecast.

2200GWH would be the required HRT if demand increase as Nalcor predicted or +70% fuel coupled with oil being 3X the current price. Three hundred and seventy percent over HRTs current fuel costs was used as a scare tactic on a gullible public. 60% NLs demand is residential, even Wade Locke let slip 20% price increase = -5% demand decline. At best (DG2 16.4c kWh)residential demand would DECREASE by 570MW from rate shock and another 406MW from population decline (-44,000).

Appointing a weak Nalcor CEO and VP alongside filling the BoD with members of little construction and utility experience was all part of the fix.

Even loud MF cheerleaders were taken in by the spin, blissfully ignorant - but they were popular so people gave them a pass.

Only fully paying MF customers are residents that represent 60% of the Island's demand (was this pre or post Long Harbor?) 23c+ kWh simply isn't affordable - Full Stop, Period.

Natural gas option was based on the insane demand forecast, again fraudulent.

Bill Rowe on CBC worst NL leaders since Confederations, Danny Williams is by far the worst leader in NL history.

Out migration for economic reasons and death from old age - both ensure that every year there will be fewer households to pay the bills. I also think demand reduction will be HUGE. With rates like these, many people will switch to oil heat and drop consumption by 90% compared to electric baseboard. Rural NL will heat with wood and baseboard heat will be set a 10C for when they are out of town and can't feed the wood stove.

There must be a price where nobody will use electricity for primary heating. Certainly 30 cents would do it since it would mean $900/month for a new home. Who would buy a home that cost that much to operate? Suppliers of oil / propane will offer monthly plans to cover the capital costs of installing the furnace and tank as well as fuel for less than the cost of electric equal billing. If the 60% (residential customers) use electricity only for LED lighting, electronics and kitchen appliances then demand will reduce by 90%. That would cut island demand in half.

This is probably the worst deal/project/experiment/development/economic/BOONDOGGLE in Canadian history and the dumb Nl'ers are paying for it. It is time we seized Galway and sold to the highest bidder to help pay for this even though it would be merely a token of what the true costs are. This is worst than the NL Railway, Upper Churchill, Labrador Linerboard, Come by Chance and Srung Greenhouse all combined.

Yes the metaphor of a “hurricane” is surely apt when it comes to the impact of Muskrat Falls. This morning we witness a fresh approach to the Muskrat Falls project, written by Guest Writer PlanetNL. The author describes how the increased costs imposed on the province’s electrical system and on its consumers will lead to collapse and bankruptcy, as consumers change their behaviour to avoid the crushing burden. Because of the sheer scale of the project relative to the province’s population and Gross Domestic Product (GDP) it will create a destabilizing impact, one which is beyond the capacity of the provincial government to control or mitigate. Unlike Site C in British Columbia, which is similar in scale, Muskrat Falls is huge relative to the provincial economy. Site C will cost $1,936 per person in BC while Muskrat Falls will cost each resident of NL $24,000. In BC the cost of Site C represents 21% of net provincial debt; in NL Muskrat Falls represents 83% of net debt. In BC the cost of Site C represents 3.5% of the province’s GDP while in NL the cost of Muskrat Falls represents 42% of our GDP. There is no comparison in terms of the fiscal and economic burden. The total cost burden of providing electricity to provincial consumers on the Island of Newfoundland will more than double, from $700 million to $1550 million. In this post today PlanetNL presents financial and economic data to show that the system cannot bear these costs and that “the Newfoundland utility system is headed straight to a catastrophic bankruptcy in 2020 or 2021.” This analysis is realistic, albeit apocalyptic, and should attract the attention not only of all citizens of our province but also that of all Canadians, who will bear the cost of the pending bankruptcies forecast by PlanetNL. We and our government ignore these warnings at our peril!David Vardy

The CBC as the Public Broadcaster should be reporting this...this is by far the most important news story this province has ever seen. Instead we are bombarded with irritating Chase the Ace, Weather, Skeets stealing Ketchup Chips stories.

So pleased to see this piece on this subject of electricity cost increase showing decline in electricity consumption, the economic term: ELASTICITY. This is central to the economic case for Muskrat, and unfortunately being discussed now rather than prior to sanction. Indeed Vardy has mentioned the subject,several times, I asked that he write more formally on this, but he deferred to James Feehan, suggesting it was more within his expertise. I had contacted Feehan on this subject, and he was indeed proceeding to do a paper on this, back this spring......which seems never to have materialised.......once promoted to he Oversight Committee. I had considered writing on this subject, but see it is now in capable hands of PlanetNL. The name reminds me of Men are from Mars , women from Venus. We occupy planet Earth, but seem to be into a separate planet here on the Rock, being led by so called world class professionals at Nalcor, heading us for a economic whirlwind. PlanetNL........a good title for those wanting to put our feet on solid ground, good analysis that is long overdue. Nalcor and Nfld Power and our government, our Consumer Advocate and the PUB, and the main media, have all in the past and at present ignored such research and analysis, available from previous studies, in other jurisdictions, perhaps to be able to deny the information and knowledge was available to them. Likely, Nalcor will ignore this piece, least they bring public attention to the crux of the poor economics. Elasticity......sounds complicated but an average person easily understands it when properly explained. Indeed , many are acting on this concept, with energy use switching, as it is common sense.....(which is seriously lacking at Nalcor).Winston Adams

Winston, I think you are right about Nalcor ignoring this piece for FEAR of bringing it to the public's attention. It's rather peculiar that both Nalcor and the provincial government are willing to do very little to set ANY record straight. Not to mention, the medias lack of interest/professionalism. Whether it's damning facts or accusations, you would think both would go to extraordinary measures to discard of such dark shadows.

So what is the point of all this? Muskrat is going ahead, like it or lump it. It can't reasonably be stopped. If it could rates would still likely rise by 90%(?) of what you suggest. Just a guess on my part but no doubt in the ball park and we would in short order need to do something to replace the power that we are expecting to get from Muskrat. The deal is done, the ship has sailed, or whatever cliche you like. No sense in rubbing it in our faces.

To your suggestion that if Muskrat was stopped `in short order we need to do something to replace the power that we are expecting to get from Muskrat`....... To this we could1. develop additional island power that is more economic and reliable and less costly as to maintain and operate.2. do some of the above but in combination with serious robust DMS and efficiency and conservation. As our primary problem has always been to meet our growing electric space heat load (650MW of residential use alone), efficient cost effective space heat reduces the energy use by more than half, and reduces yearly electricity bills. This is a gift from Mother Nature and Japanese manufacturers that means we use our electricity for space heating more wisely (it is prudent Liberty might say) and is equivalent to the benefit of natural gas low prices in many North American jurisdictions.. and many are jumping to the beat of that drum already here.In essence......it is and will kill the island demand for Muskrat power. It is basic arithmetic......that permits a different value of elasticity of electricity, one that otherwise would be much less damaging, if baseboard(resistance) heaters was a captive market. It seems Nalcor hoped this would be the case, a false assumption, and well known before MF sanction. So Nalcor will avoid discussion of the content of this piece by PlanetNL.Winston Adams

No sense holding the authors of this disgrace to account huh? Forget the likely dam failure and carry on?

Why will MF not be stopped? To protect the guilty?

You also forget that the rate/taxpayer will have to subsidize every Kw produced by the difference between cost of production (at least 65 cents) and what you will pay (up to 35 cents it appears from this post). You save at least 30 cents for every Kw produced by NOT operating MF. This pain will go on for 57 years thanks to the bizarre financing arrangement at MF.

Bruno, get over yourself. You seem to suggest we spend $10 billion(?) for nothing. The potential savings through stopping this project now are minimal, if the current provincial government and new Nalcor CEO are to be believed. In the meantime we need to spend more money to build some other source? More money. This article is another in a long list of hindsight articles that add nothing to the discourse. We are too far along this road. We still will be paying for Muskrat no matter what. Not stopping it has nothing to do with protecting guilty parties as you suggest, as if there were any. So yes carry on. Every dam ever built could possibly fail. Experts have said this is safe and not "likely" to fail. If you want to add to the discussion help explain what specifically lead this from the initial cost estimates to the current. That might be a public service that has some value. Everyone knows we are going to pay more every month than we current are. Nothing is going to change that. And this article only serves to point out what we all know. It holds no one to account. Most of what I have read here on the entire topic consist of opinion that someone else has argued against. So I don't see much overall value in it. Nor do I expect anyone of any consequence to be guilty of anything. I guess that will be proven in the upcoming enquiry.

@15:33 The point is to educate the public so that we can start planning our recovery from this disaster. Powerful people need to go to jail. Nalcor needs to be shut down. We need a debt reduction plan - either a bail out or a default. We need to ensure that things like this cannot happen again. Government needs to fear the public. The alternative to publishing articles like this is IGNORANCE. Is that what you are proposing? An ignorant and compliant population of sheep to fleece?

You are mistaken on your cost assessment---we are not spending $15B, we have spent $10B so we are now preparing to spend an extra $5B to complete. There is over $10B committed/spent and irregardless of what happens we tax payers will pay that $10B back---the question of operating MF is a different question entirely, it may not make sense but that is separate analysis.

The issue to consider is whether the additional $5B is justified---the risks are defaulting on the federal loan agreement, Emera NL supply/cost implications, mothballing/remedial costs, and the cost to cancel construction contracts; these costs far out weight the $5B to complete.....

Either way you analyze it, we as Nlers are not in a good position----we just need to figure the best possible outcome from here. I wont address comments towards defaulting etc----not an option if we want to retain sovereignty.

I standby by my former comments that halting construction is not feasible now, with reasons provided previously.

Now of course, as in Ontario, the Government will promise to protect consumers through "rate mitigation". However, lets be clear: the Government is afraid that consumers will avoid higher electricity rates through conservation or switching to other energy sources. One cannot however avoid taxes quite so easily.

Soot Boots, (JP) comments above are interesting and probably true. Obviously the rate payers alone can not bare the burden of this boondoggle. Sooo. Other measures will be needed witch means more taxes to those who can hardly afford them. The smart money IS on moving.

The elasticity number for electricity is difficult to pin down. Last April, 2016, at the Nfld Power rate hearing, at the PUB, there was a little discussion on that, with Nfld Power saying that the number being used was -0.20, but might go to -.30 with power rates at about 16 cents. Andy Wells had little to say on it. No media reported on the issue at all, none even being there. The source reference by PlanetNL in this piece is from USA studies, showing effects when electricity rates double, suggesting -0.28 for residential long term. However for electricity for air conditioning, showing long term reduction for electricity used being 31 percent reduction for commercial and 58 percent reduction for residential. In the USA the large loads are for air conditioning, where here it is for baseboard resistance heating. There is not much electric baseboard heating in the USA, whereas here it is huge. Proportionally it is much larger that air conditioning loads in the USA. There are a few areas world wide has has significant baseboard heater electric loads, and this is how, I suggest, we can compare the elasticity effect of price increases, as the prime use for electricity here. Light , fridges etc are essential loads that will see little reduction. Where there are competitive alternatives for space heat,customers switch, especially to gas, if electricity prices go up. I have seen figures from studies citing elasticity as -0.67, as I recall, and even higher from Hydro Quebec, where gas is available as a heat source. This is for space heating component of the electricity used. So the demand reduction is very much dependent on the cost of heat for alternatives. Many on this blog think only of propane, oil or wood as alternatives. But heatpumps which are all electric, use so little electricity, that they are similar effect to having cheap natural gas to your door. This is the alternative that is now happening in Nfld big time. Dave Vardy has suggested elasticity figure of -0.4 and -.5. As space heating is about 60 percent of our residential load , it is the elasticity for electricity for space heating component, as to alternatives that is critical. It suggest a very large demand reduction going forward with price increases. And such technology for hot water is on the uptake as well. Perhaps Bernard Lahey may know the figure from Hydro Quebec studies. For this reason I have monitored heatpump performance for the Avalon region, to determine the competitive nature and saving compared to baseboard heat. This type of `end-use` research is done as a best practice by many power companies.....but not here.......as they wish to keep customers, in the dark as to their effectiveness, and to hide the depth of their incompetence in power demand forecasting..........but demand reduction is showing it`s ugly head already, and will get much worse. As Vardy has previously stated, elasticity factor is a basic economic analysis.......but this which was deliberately ignored. They still want to sweep it under the rug......put it cannot be covered up forever. It will have damming consequences.Winston Adams

The bottom line here is that Nalcor: will be the straw, a very huge one, that will break the backs, bank accounts and desire to have anything to look forward to for every person, every small business and the economy of NL. for many years to come. The handful of thieves that are responsible for this Reign of Terror, may walk away free from prosecution. Why, because the power that this group has over the government, and the justice system allows them to cast a cloud of fear over anyone that has evidence to bring these thieves to justice. Many others would rather allow this to continue because they work for the system and in a way are "set for Life". There is only one way to end this catastrophe. When the next election is announced, don't vote Liberal, PC or NDP, Vote REVIVE NL. www.revivenl.org Alone we can do so little, together we can do so much. I am willing to sacrifice myself to expose the truth at any cost and my ambition is not money, it's justice and a New Horizon for this province to start over clean. The financial situation can and will be overcome.

According to the present Nfld Hydro application to the PUB, all their assets is valued at just 1.7 billion dollars. This includes 10 hydro sites, the largest being Bay D`Espoir, and assets of many diesel generation, and includes gas turbines, Holyrood plant, many substations, and many miles of high voltage transmission lines. In all, some 2000 Mw of capacity. Bay D`Espoir being about 600 MW, is therefore valued, it appears to me, at maybe 900 million. Meanwhile Muskrat can deliver only about 500 MW on average to the Avalon, yet this project costing some 15 billion. Questionable if the whole MF assets worth much more than 1 billion dollars as for its capacity. And reliability of power is another question, taking years into the future to know. Now the present application for island improvements on its assets seems to total 1.15 billion. Add to that almost another .5 billion by Nfld Power for upgrades........all together about 1.6 billion....... this on top of Muskrat costs. Each 100 million adds about 2 percent to our rates, so about 30 percent, about 3 cents per kwh on top of Muskrat additions. Hydro`s breakdowns show maintenance and upgrades: 55 million for Holyrood, 40 million for gas turbines, 236 million for terminal stations, 377 million for transmission ...etc. Spending 1.15 million on assets worth only 1.7 billion! Yet some of Holyrood must be used beyond 2021 as not all will be decommissioned! One of the 3 units is needed, as is the building and terminal station, and 15 million for the new gas turbine upgrade there, and upgrades for the other very old and little reliable gas turbines. Seems no end to the waste.......that we squander 15 billion on MF with existing island assets so in need of upgrades..... and still questionable reliability when all is done, as Liberty pointed out (what is our backup when MF goes down). Maybe should be an hanging offence,(or a public flogging), or 50 years in jail. Instead we give 6 million to Martin and bonuses to others. Oh, just to have the little cucumber scandal instead! We have allowed our leaders to go mad, surely. Must have been the temptation of that temporary oil wealth that drove them crazy, and for Danny to roll the dice.Winston Adams

Agree totally, temporary oil drove them crazy and to go mad. Yes, normally people like that are usually jailed or put in asulimuns, for having committed no crime against society, but rather just the possible potential. We have them that has the potential to bankrupt the province and we just reward them. Where is the justice? A few years ago some use to refer to it figuratively speaking as oil on the brain. But I think it was literally speaking as they must have enhaled not only the fumes but the sweet raw crude, it affected their little brains and drove them crazy, the medical profession should have been called in to do a proper diagnosis. Yes, that's the only way their actions could have been explained at the time. It was so obvious to a lot if us, that it was madness, and one person wrote the book muskrat madness. Think it was published just after scantioned.

Here is how the fossil fuel industry in Calgary, together with the BC Hydro collaborated to "develop" the Climate Change Plan for BC Liberals. With NALCOR in a true conflict of interest situation involved with fossil fuel and supposedly renewable energy, (Hydro), it appears that the Williams Gov. took bad advice on the same strategy;

I have read the content of Gerry Skinners website, mentioned above on his post.1. It is entertaining and laughable as a solution to our problems.2. Most ideas are pie in the sky.3. A few ideas may have a little merit......maybe4. Skinner will make us `world class`......sound like Nalcor, with Skinner instead of Ed Martin5. Little Belle Isle will become a penal colony, convicts will build Sprung Greenhouses, grow food from renewable resources, learn trades for installing solar panels. Bell Island will have a bridge connection, as foreseen by Steve Neary, property value there will quadruple. All seniors in the province will have 75 percent free electricity, even if you are a millionaire. Nalcor will be shut down and renamed Skinner , with the slogan :Never be Skinned no more. Make Nfld Great Again. 6. He offers himself up as a sacrifice, for the vision and legacy of other great men with the name, starting with the letter S: Squires(who stole from the Liquor Commission, and the War vet fund for his personal use; Smallwood ( who had great ideas of chocolate bar and rubber boot factories, and bringing tanker loads of Florida orange juice to Nfld). Skinner will reverse the tanker direction, loaded with drinking water to Florida.7. Skinner runs an infomercial on VOCM, being a dealer for solar panels and wind, mostly for cabins. A 4kw system costs in excess of 50,000 dollars, according to his website, and yet cannot be used for heat or hot water, as it has so little capacity. A power system for the rick with cabins, not for the average Joe`s house.7. Yet Skinner is taken serious by our Cnnsumer Advocate......Browne. Browne called me about 6 months ago, by mistake, as he was looking to speak to Jerry Skinner........

Not sure even God can help us from this Muskrat mess. Even the Commission of Govn , with the best 3 officials of Britain and 3 best from the island could not set on to prosperity with 15 years of trying..... so they handed us over to Canada. Fortunate we are mostly white, otherwise we would be like Haiti, forever doomed and at the mercy of others. Even foreign aid gets siphoned off before reaching there, and with leaders such as Papa DOC......... Skinner might have suggested towing the ROCK south to around Bermuda......150 tug boats, built at Marystown should do it, our winter heating problem solved, and where he would be busy installing solar panels, as they get so little fog.....his business would take off.

We have fundamental problems here big time. We now have the Nfld Democracy Cookbook that looks into this.......so maybe Ches Crosbie, with his cooking tips is on to something....... A VISION........is it anything more that cooking up some ideas to see of it flies with the public.........there may be good visions and bad ones.....that transform into nightmares. Skinner has a vision, of sorts.......but seems mostly BS to me. Be aware of anyone who says they are willing to SACRIFICE themselves.......Danny Williams never took a salary.....and he gave us the boondoggle. His name on a justice building, I believe, in Corner Brook.......if so, Williams must Fall,...... like in England and Africa,where they say Rhodes must Fall!Winston Adams

I would ask that PlanetNL give an Outline of the potential to convert Heat and Power demand (50yr horizon), for Avalon region, based on highest conversion to Renewable Energy Technologies. I am thinking that European CHP concepts are directly applicable to Communities and Industries in NL and geothermal and wind/solar provides direct energy opportunities.

PlanetNL series is to be based on independent research and calculations. The estimate of 35 cent per kwh power to cover costs seems appropriate, and rates of 17 cents implies costs being covered by other taxes. 35 cents is about 5 times Hydro Quebec rates and more than 3 times that of other provinces with large hydro resources like Nfld (Quebec, Manitoba, and BC) As readers of this blog are aware, I have been doing field testing of efficient alternative heating systems that many are already switching to, and now used extensively in Nova Scotia this past decade. Data for performance from manufacturers can vary with field results for a variety of reasons. Most studies reflect labratory testing in the USA, or of project results in other jurisdictions, where the climate is somewhat different from ours. The technology is proving to be excellent for Nfld, but there are best methods to get the most saving. Most savings involves two aspects: 1. savings on the homeowner yearly power bill, and 2. indirect savings by reducing the grid peak load, a big saving to the power utility. The heating unit`s performance is tied to our climate, both temperature and relative humidity and wind conditions.......therefore field testing is important .............yet the power companies avoid doing this work and underestimate the benefits, and provide little useful information to homeowners and contractors. My research may aid PlanetNL in its analysis as where our power loads is heading as a result of rate increases and in particular for residential customers switching to alternatives, with growing uptake of these systems. I would like to hear from Planet NL and provide them with my results to date (since the power companies avoid informing customers of many best practises and how to optimise their savings). Winston Adams

The problem with this analysis is that it assumes government will let rates get that high. That will not happen under any circumstances for the very reasons pointed out in this article, they cannot allow demand to drop or the whole ponzi scheme comes crashing down. So it will be capped at 17c per KWH and the rest will all come through taxation. Keep in mind that even at 17c KWH low income people and seniors on fixed incomes will be rioting in the streets for supports. Gov't will design a program to offset their costs and the remaining taxpayers will foot the bill, double whammy. Keep in mind that 12-15% of the people pay 88% of the provincial incomes taxes, try to imagine how much that 12-15% will get drilled. Not only will you have to pay your own share, but you will pay for several other people as well. This will not be a fun place to live if you are making a decent wage in this province. What professionals like doctors and engineers would want to work in NL and endure such high levels of taxation compared to the rest of the country. This will create a massive retention issue that is not being considered at all. What a mess.

Anon @ 19:01.--your analysis is spot on. Either way the massive debt incurred by MF has to be paid. Massive tax increases are inevitable along with Ball's "mitigation" of electricity rates.Because of Danny's over-inflated ego and Kathy's vunerability to be manipulated by the aforementioned, we as a province are doomed. These two formner Premiers should be tarred and feathered before they face the courts.I don't understand Ball's contention that we are locked in to Emera's contract "at all costs". What's stopping costs from spirialing even further than $15B? Unless a forensic audit commences which is at least a start to get some kind of control on the public purse, MF is destined to be a bottomless money pit, all at our's, our children's, grandchildren's, and greatgrandchildren's expense.It would be quite the specticle to see a brave journalist "confront" Disgraceful Danny and get him to explain his warped sense of math with MF. Also has anyone even tried to get a comment from Kathy?I've said it several times before, there must be some way to attract the interest of The 5th Estate and W5. A scandal involving the two former Premiers would insure the RCMP gets involved. Surely Disgraceful Danny wouldn't threaten to sue the mainland media--would he??

Isn't this $1350 a bunch of hogwash? If the current revenue requirement is 700M and 150M will be saved by not buying oil, that leave $800M to pay for MF. About 100M is operating costs. And a bunch has to go to servicing and retiring the dept. But even if the debt were the full 12B --and I don't think it is-- then 700M per annum for interest and to pay down the principle is way too much. PlanetNL: Can you explain this?

Just wondering if dunderdale was writing this, as her favorite term when she was explaining muskrat to her critics was "hogwash". Planetnl has explained this quite simply the increased cost is 800$m plus current cost 700$m is 1500$m minus Holyrood 150$m is 1350$m. But am sure Planetnl can varify these number and simple arithmetic gives the answer.

MOOSE....I know I am way off topic...and appears to be a lull on muskrat) except it concerns the public purse if fences were to be built. Fences separate people from moose, and as half the population of the province lives east of come-by-chance, and my understanding of moose accidents is approx. one half occur east of the same point, then would it not make scenes to construct a THREE mile moose fence at the isthmus of the Avalon. Then wipe out the moose on the Avalon...wow...bet some BP just went sky high. Yes, those on the Avalon would have to get their moose west of that, but most do now anyway, and maybe that one three mile fence would reduce moose accidents by 50 per cent. Just a thought, but a lot better, I think than most other solutions I have heard. If we could not build moose fences when oil was 100.00$ a barrel, and before muskrat, can't see where we can afford to build extensive fences, half way across the TCH now. Yes, I say ...wipe out the moose on the Avalon. OMG, now I will have to go out to millertown too. But got to get me moose b'y.

I don't think moose like to swim much in salt water unless forced to do so. Moose were brought here by man, they did not swim here. Even if a couple of brave ones did swim across the bight, I am sure they would not get far before some hunter would have them in their sights. Don't think that would be a problem, the real problem is for hunters/people/governments to agree to have no moose on the Avalon, that's probably less than 5 per cent of the total land mass of the island.

Where do moose swim 30 miles in cape Breton, have spent some time there, neve saw or heard if it. Never heard of so many moose highway accidents in cape Breton as on this island, particularly on the Avalon. So my point is about saving human lives as well as moose lives. In every accident, the moose is either killed or has to be put down. Sometimes the human is killed other times maimed for life, and as if yet we don't put these people down, but they live a horrible, terrible life after the accident. Just being humain. And no I don't talk to trumpie, he should be allowed to live, but not in the White House.

Ok, Bruno , just taught about B'eau lakes, yes they are mainly salt, was thinking fresh water, so you may be right. But my whole point about fences, was to build a 3 mile fence rather than hundreds of kilometres like in nb to seperated moose and people, as we in nl can't afford it, and not expecting trumpie or Mexico to pay for it

McCurdy's stepping down, provides an opportunity for some progressive political leadership on Muskrat. The NDP/Greens in BC is our hope to contain the Tory/Lib mismanagement of resources, and in particular, the Site C Hydro project. Time for similar political action in NL. Where is Jack Harris?

I have worked for two government departments and have met enough managers, directors and ADM's to tell you that the civil service is a mess of incompetence and cronyism. It needs to be rebuilt from scratch and that will never happen from within.

The individual who torched any modicum of integrity and credibility he may have once had, with the Ed Martin Severance Pay Fiasco... Dwight Ball... has recently been making noise on the airwaves that an "inquiry" into the Muskrat debacle is in the works, and that the latest scheme that has come to light to pillage the provincial treasury via apparent over-billing by embedded contractors, uncovered by The Telegram's investigative reporter... "doesn't pass the smell test".

Is the Ball-Coady comedy of errors so astoundingly inept as to only find out about this particular aspect of the Muskrat Ponzi scheme from a local news reporter? Or were they aware of it all along, with Ball expressing his dismay in a faux show of disingenuously righteous indignation?

This latest blather from the one who has long-since flushed his integrity & credibility down the toilet... appears to bejust another cynical attempt to mollify enraged taxpayers, while implicitly reassuring the bloody Muskrat oligarchy and their associated cronies and henchmen it will continue to be "business as usual", despite this latest Muskrat outrage.

I ask Dwight Ball... how the hell can there be any meaningful Inquiry without first conducting the Forensic Audit, which will in turn expose the irregularities that will justify the Inquiry??

DON'T go continuing to insult the intelligence of the taxpayers, and either honourably discharge your responsibilities to the citizens as the duly elected leader of this province. Or else, if you haven't the belly for it, then get the hell out of it, and go back to your bloody drugstore in Deer Lake.

I once worked on a large, important but failing project in another province. I had a list of dozens of problems and had a team of consultants developing solutions. Then one day a managing director of a top tier consulting firm called me aside for a chat. He said "there is a some noise" coming from the project. We need to drown it out. He suggested inviting in some low level public servants to give testimonials at a large assembly talking about how the project would make their jobs so much better and how excited they were.

So rather than actually doing anything to fix real problems, they monitored noise (like this blog) and employed propaganda. That is when I decided to change careers because the next career step up would to become like him.

Here is an interesting article. It is about Ground to air system (Sometimes known as Geothermal) that completely heats and cools homes in a new subdivision in Georgia, USA. The payoffs are huge with up to a 70% savings in energy costs. Is it being implemented here in new subdivisions in NL? NOPE!!!

I like the idea of shared services for a subdivision but think the pinewood model be too expensive here. Air to water heat pumps are used on many new government buildings and are as efficient as many geothermal systems. These could service many homes and no drilled wells are required. We could incinerate garbage in Robin Hood Bay to product electricity and hot water for district heating. We could use solar collectors to save heat in the summer and store it in huge tanks for winter to heat a sub-division. We could build solar passive homes.

There is little vision here amongst those who have the finances to build a subdivision. I'd love to design and build a self-sufficient and affordable community in Newfoundland.

The underground portion of the system could be built as part of a developments infrastructure in much the same way Utility poles, water and sewer systems and roads are built as a single unit not as a part of each individual home. This will effectively reduce costs.

About Des Sullivan

Uncle Gnarley is written by Des Sullivan, of St. John's.
He is a businessman engaged in real estate, retail and development companies.
A Director of Sullivan Capital Corporation, he is a former Executive Assistant to Premier's Frank D. Moores (1975-1979)and Brian Peckford (1979-1985).
He also served as a Part-Time Board Member on the Canada-Newfoundland Labrador Offshore Petroleum Board (C-NLOPB).
Uncle Gnarley permitted the use of his highly regarded name provided he could have full access to state his own rather unequivocable opinions. (A more detailed Profile of Uncle Gnarley is described in the very first Post entitled "Uncle Gnarley is alive and well" found on this site.
Sullivan is a firm advocate of sound fiscal management by the provincial government and intends to use this Site as a forum for commentary on the major issues of the day. Says Sullivan, "Newfoundland and Labrador inspires debate on a variety of issues, a veritable Muskrat Falls of opinion".
Readers are invited to leave their opinions, too.
Uncle Gnarley will post every Monday, and more often as events warrant.